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Is AT&T getting ready to roll out a $99 iPhone 3GS in time for the holidays? "Boy Genius", of Engadget fame, is asserting that two anonymous sources told him they are doing just that, as a "way of combating the DROID madness.”

Verizon's new Droid line of Google Android smartphones have stolen some of the iPhone hype as we move into the busy holiday season. Verizon would like to post big numbers to build momentum for the new brand, and it's not inconceivable that Apple could be trying for a knockout punch. The Droid Eris, HTC's low end Android 1.5 smartphone, lists for $99, and positioning an iPhone 3GS at that price point would make the newest iPhone competitive at all levels.

Boy Genius wrote:

Definitely not confirmed, but rather interesting nonetheless. We’ve heard now from two sources that AT&T, and we guess Apple, are contemplating launching an 8GB iPhone 3GS at the $99 price point before Christmas. One source said this was AT&T’s way of combating the DROID madness.

There's more than a few problems with this rumor, however. Apple has up until now announced new iPhones in the summer months, and the rollout of a low-end 3GS model would leave no real reason for the whole iPhone 3G line to even exist.

It's not impossible that Apple's thinking of something that off-the-wall, but that doesn't mean it's likely.